How to Get a Used Car Loan in Toronto

You’re finally ready to take those first steps towards owning your own car. You’ve looked into brands, makes and models, and already have the perfect interior picked out. The only problem is, you have no idea how you’re going to pay for it. In this article we show you how to get a used car loan in Toronto.

If it’s your first time applying for a car loan (or you’ve forgotten how the process works), we’ve got the basics covered for you:

Check your Credit

As with any loan or large purchase requiring outside financial assistance, your first step should always be to check your credit score. Make sure everything is accurate, and that you understand where on the scale you fall. A credit score that’s too low means you either won’t be able to get financing on your own, or that you’ll have to pay a much higher Interest rate than someone whose score is on the upper end of the spectrum.

Regardless of whether you choose to get financing from a bank or directly from the dealership, you absolutely have to know and understand your credit score beforehand because it’s the only negotiating power you have. Many dealerships, for instance, have a bad track record of giving new car owners financing by offering an Interest rate that is much higher than what they should actually be paying. This tactic, called a dealer markup, can only be avoided by understanding where you stand in regards to your credit history.

It’s also good practice to make all of your inquiries into your credit score within a 14 day (2 week) period. Some credit scoring models have penalties if you make too many inquiries into your credit history but as long as you keep them within a two week window, you’ll be exempt.


Once you know your credit score, you have a better idea of the type of loan you’ll be offered (as well as how high the Interest rate is likely to be). It’s important to look through all of your finances and come up with a budget so you don’t end up with a loan you can’t actually afford to pay back comfortably. The length of the amortization period you choose will also depend on your budget; If you can swing larger monthly payments, then you can choose a shorter loan period (meaning you pay less Interest long term as well). Become as intimate with your finances as you possibly can, and make sure there are no surprises when you when you choose to start shopping around for auto loans.


If this is your first time getting a loan (or if you’re young), you might not have a solid enough credit history for banks to risk financing you. This is not a deal breaker in and of itself, it just means you’ll have to find someone responsible with a good credit history to cosign the loan with you. While the loan will still be your responsibility to pay, the co-signer takes on the burden of assisting with any payments you might not be able to make (or else they risk jeopardizing their own credit score).

Decide Whether to Finance Through the Dealer or Your Bank

While you can always get financing on the spot directly at the dealer when you go to buy your car, make sure you’re as informed as possible about other options before blindly agreeing to the Interest rate and loan conditions they offer you.

Here are some of the key differences between applying for a car loan at the dealerships versus at a bank:

  1. many dealerships offer financing on the spot while banks don’t
  2. dealerships offer amortization periods of 1-8 years while banks offer 1-7

Financing at the dealership is a good option if you already know exactly which type of car you want (and what you can afford) while financing at the bank is best is you aren’t sure how much you can afford and are still shopping around for cars.

If you choose to receive financing through your bank, here are some things you need to know:

  • an estimate of how much you want to borrow
  • your current address and previous address (if you’ve lived at your current address for less than 3 years)
  • your income (amount and where it’s coming from)
  • your monthly mortgage or rent payments
  • your overall monthly payments (loans, credits cards, lines of credit)
  • your household costs (utility bills, property tax, insurance and so on)
  • a bill of sale before finalizing the loan
  • You can also bring your SIN (Social Insurance Number) but it’s not a requirement.

Sell or Trade in Your Old Vehicle

If you already have a car, a great way to reduce how much you’ll have to pay for your new one is to sell it or trade it in. Do some research and talk to other people who’ve been through this process before and don’t make any rash decisions. It’s better to take some time to really sort out your options rather than regretting selling it too soon.

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